BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1464|
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THIRD READING
Bill No: AB 1464
Author: Assembly Budget Committee
Amended: 6/13/12 in Senate
Vote: 21
SENATE BUDGET & FISCAL REVIEW COMMITTEE : 11-0, 6/14/12
AYES: Leno, Alquist, DeSaulnier, Evans, Hancock, Liu,
Lowenthal,
Negrete McLeod, Simitian, Wolk, Wright
NO VOTE RECORDED: Emmerson, Anderson, Fuller, Gaines, La
Malfa
ASSEMBLY FLOOR : Not relevant
SUBJECT : 2012-13 State Budget Act
SOURCE : Author
DIGEST : This bill enacts the 2012-13 State Budget Act.
ANALYSIS :
Background
On May 14, the Governor released his May Revision for
budget year 2012-13. The Governor indicated the remaining
and adjusted General Fund (GF) deficit was $16.7 billion
for the two-year period ending June 30, 2013. This
included a $1 billion reserve.
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In January, the estimated GF shortfall was $10.3 billion -
including a $1.1 billion reserve. The budget deficit
increased by $6.5 billion since the Governor's initial
budget proposal in January. The deficit has increased due
to a reduced revenue outlook, higher costs to fund schools,
and decisions made by the federal government and courts to
block previously-approved budget cuts.
This budget relies heavily on the Governor's May Revision
framework that relied primarily on expenditure reductions,
as well as passage of a tax initiative on the November 2012
ballot, and additional "trigger" reductions if the
initiative is not successful. This budget includes $8
billion in expenditure cuts, $5.9 billion in revenues, and
$2.3 billion in other solutions for a total of $16.2
billion in solutions. The budget amendments included in
this bill and the accompanying trailer bills will result in
approximately $92 billion in expenditures and a reserve of
around $500 million in the 2012-13 budget year.
Specifics of the bill
Overall, this Budget adopts the Governor's May Revision
framework, with the exception of $1.2 billion in
expenditure reductions, primarily to the CalWORKs program,
child care, In-Home Supportive Services, Healthy Families,
and Medi-Cal. The $1.2 billion in cut restorations are
offset by about $900 million in new solutions in this
budget plan. The largest alternative solutions include
capturing additional property tax increment funds to offset
Proposition 98 expenditures pursuant to last year's
dissolution of redevelopment agencies (about $250 million),
capturing unspent Proposition 98 "reversion" funds to
support education programs in the budget year (about $200
million), and adopting a more consistent "rebenching"
method for the Proposition 98 budget (about $100 million).
The bullets below delineate the major changes to the
Governor's May Revision embedded in this budget plan:
1.CalWORKs : The Governor proposed a major restructuring
of CalWORKs and major cuts to grants, totaling $880
million. The joint plan does not adopt the
restructuring, but cuts a total of $428 million from the
CalWORKs program. The cuts include continuing reductions
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to the single county allocation that have been in place
since 2010-11 (these reductions exempt recipients with
young children from some requirements of the program,
thus saving expenses for child care) and by instituting
annual reporting in child-only cases.
2.Child Care : The Governor proposed major reductions to
the state's subsidized child care programs, totaling $452
million. The joint plan reduces General Fund
expenditures by $271 million. The bulk of this savings
is achieved by consolidating funding for the part-day
part-year preschool program funded within the Proposition
98 guarantee and making a commensurate General Fund
reduction to the General Child Care Program. In
addition, the plan includes $50 million of
across-the-board reductions to child care slots that
would reduce 6,600 slots.
3.In-Home Supportive Services (IHSS) : The Governor
proposed $225 million in reductions to the IHSS program
through a 7 percent across-the-board reduction in hours
of service provided to recipients, and reductions to
services for recipients in shared-living arrangements.
The joint legislative plan cuts a total of $90 million
from IHSS through continuation of existing 3.6 percent
reduction in hours, which was set to expire on June 30
and other proposals to reduce caseload and maximize
federal funding. In addition, the budget assumes larger
savings in the out-years from the state being successful
in appeals of previously-authorized cuts that are
currently before the federal courts.
4.Cal Grants: The Governor proposed a total of $292
million in cuts to the Cal Grant higher education student
financial assistance program. The joint plan adopts a
total of $55 million in cuts to Cal Grants by accepting
the Governor's proposal which would set limitations on
eligibility for Cal Grants based on an institution's
graduation and loan default rates. In addition, the
joint plan accepts the Governor's proposal to reduce the
Cal Grant award levels for private institutions
(non-profit and for-profit), but the joint plan phases
the implementation of the cut beginning in 2013-14 so
that it would apply only to future Cal Grant recipients.
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5.Other Restorations: The joint plan restored much smaller
amounts for some other proposed cuts, including cuts to
the Healthy Families program, the AIDS Drug Assistance
Program, and community health clinics. In addition, the
joint Legislative budget also restores $10 million to
open two new veterans' homes.
This plan relies on the Department of Finance revenue
estimates, and is predicated on the passage of the
Governor's tax proposal. The Governor's tax proposal is a
Constitutional amendment that would raise the personal
income tax and the sales and use tax on a temporary basis.
Together, the proposed increase in the two taxes is
expected to raise an additional $8.4 billion through the
budget year, representing $2.9 billion to schools and
community colleges and $5.5 billion for General Fund
benefit. The measure would also permanently dedicate
revenues to local governments to pay for public safety
programs realigned in 2011.
The plan assumes the state will receive $8.4 billion in
additional personal income tax and sales tax revenue from
the Governor's tax initiative on the November ballot, of
which $5.5 billion will be used to balance the budget.
(The remaining $2.9 billion will grow the Proposition 98
guarantee for schools.)
In the event that the voters do not approve the Governor's
tax proposal in November, the Legislature's joint plan,
like the Governor's, includes a series of trigger cuts.
These cuts are detailed below:
2012-13 Trigger Cuts (in millions)
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|Program Area |May |
| |Revision |
| |Amount |
|------------------------------------------+---------|
|K-14 Education (Proposition 98) | $5,493.6|
|------------------------------------------+---------|
|University of California | 250.0|
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|------------------------------------------+---------|
|California State University | 250.0|
|------------------------------------------+---------|
|Courts | 0.0|
|------------------------------------------+---------|
|Developmental Services | 50.0|
|------------------------------------------+---------|
|Department of Forestry and Fire | 10.6|
|Protection | |
|------------------------------------------+---------|
|Local Water Safety Patrol | 10.6|
|------------------------------------------+---------|
|Flood Control | 6.6|
|------------------------------------------+---------|
|Public Safety-Fish & Game, Park | 6.0|
|Lifeguards and Rangers, Department of | |
|Justice | |
|------------------------------------------+---------|
|Total |$6,076.8 |
| | |
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Comments
Overall, this version of the Budget prioritizes K-12
education, higher education, and public safety.
Significant reductions were made in the health and human
services areas, but in many cases, alternative cuts were
found that mitigate the harshest of these reductions. Most
areas of the budget saw significant expenditure reductions.
Expenditure reductions are 50 percent of the overall
solution to balancing the budget. This plan includes $8.0
billion in expenditure reductions by adopting the vast
majority of the Governor's proposed cuts.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Budget and Fiscal Review Committee,
the fiscal impact of the contents of this and associated
trailer bills is to achieve $16.2 billion in budget
solutions. As of the May Revision, the Governor estimated
that the state had a deficit of $16.7 billion, which
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includes a $1 billion reserve. This budget would result in
approximately $92 billion in expenditures and approximately
a $500 million reserve.
DLW:nl 6/14/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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